Securities and Exchange Commission v. Adams et al

Filing 398

ORDER granting 396 Motion to Approve Second Distribution. Signed by District Judge Carlton W. Reeves on 12/01/23. (TK).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

CAUSE NO. 3:18-cv-252-CWR-BWR

ARTHUR LAMAR ADAMS AND
MADISON TIMBER PROPERTIES, LLC,
Defendants.
ORDER APPROVING SECOND DISTRIBUTION
Before the Court is the Motion to Approve Second Distribution, Docket No. 396, filed
by Alysson Mills, in her capacity as the court-appointed Receiver for Arthur Lamar Adams
and Madison Timber Properties, LLC. For the reasons stated, the Court GRANTS the motion.
BACKGROUND
The Receiver asks the Court for permission to make a second distribution to Madison
Timber’s victims using the same method that this Court already approved. 1
In 2021, in anticipation of her first distribution, the Receiver filed a motion to approve
first distribution 2 that prioritized restoring each investor’s principal—that is, principal still
due to the investor under the investor’s promissory notes after subtracting any interest the
investor ever received (what is often called net losses). An accompanying memorandum
explained the Receiver’s proposed method of distribution. 3 Because the distribution was her

Order Approving First Distribution, Docket No. 282.
Motion to Approve First Distribution, Docket No. 264.
3 Memorandum in Support of Motion to Approve First Distribution, Docket No. 265.
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first, she notified victims and interested parties, including the U.S. Attorney’s Office and
Securities and Exchange Commission, and invited their input before the Court approved the
method of distribution. With few exceptions, no one objected to the method of distribution.
After a hearing, the Court approved the method of distribution 4 and the Receiver made
approximately $17,500,000 available to qualifying Madison Timber victims. That first
distribution repaid 32.7% of Madison Timber victims’ net losses.
The Receiver recently reached settlements with certain defendants in separate but
related lawsuits. The Court approved those settlements on November 14, 2023. Presuming
that the Partial Final Judgments and Bar Orders become final on December 14, 2023 (30 days
later, per Federal Rules of Appellate Procedure), the Receiver wishes to be in a position to
distribute a substantial portion of those proceeds promptly.
The Receiver anticipates that she will be in a position to distribute up to $14,500,000
to qualifying Madison Timber victims. That proposed second distribution could repay an
additional 27% of Madison Timber victims’ net losses, for a total of nearly 60% of net losses
to date.
Because the proposed second distribution will use the same method that this Court
already approved, 5 the Court agrees that it does not require the same notice or hearing that

Order Approving First Distribution, Docket No. 282.
Order Approving First Distribution, Docket No. 282. The Court’s order expressly stated that the Court
took no position on whether notice or hearing would be necessary prior to the Court’s approval of possible
future distributions. Id. at 6 n.3.
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preceded the first distribution. 6 It therefore addresses this motion in its ordinary course of
business, having allowed time for objections as contemplated by the Court’s local rules. 7
ORDER
When considering a proposed distribution, the district court’s “primary job” is simply
“to ensure that the proposed plan of distribution is fair and reasonable.” S.E.C. v. Wealth
Mgmt. LLC, 628 F.3d 323, 332 (7th Cir. 2010) (citing Official Comm. of Unsecured Creditors of
WorldCom, Inc. v. S.E.C., 467 F.3d 73, 84 (2d Cir. 2006)). The Court already determined that
the methodology on which the Receiver’s proposal relies is fair and reasonable. 8
In light of the Court’s prior order, the proposed second distribution is hereby
APPROVED.
Accordingly, the Court hereby ORDERS that, when proceeds from the settlements
the Court approved on November 14, 2023, become available for distribution:
1.

The Receiver shall make up to $14,500,000 available to Madison Timber’s

victims, its investors.
2.

The Receiver shall use the same method of distribution that the Court already

approved. 9
3.

The Receiver shall attempt to issue checks to investors who qualify within 30

days of the settlements’ proceeds’ availability. The checks shall represent each qualified
investor’s pro rata share of up to $14,450,000.

As before the Court takes no position on whether notice or hearing would be necessary prior to the Court’s
approval of possible future distributions.
7 The Court observes that the Receiver posted this motion on her website, madisontimberreceiver.com,
along with instructions for any interested party to submit an objection to her directly.
8 Order Approving First Distribution, Docket No. 282.
9 Id.
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4.

The Receiver shall set aside $50,000 from the settlements’ proceeds for the

benefit of investors who do not qualify for a distribution, but who establish a financial
hardship based on objective measures, including their age and income. The Receiver shall
advise investors who do not qualify for a distribution that they may apply for an equitable
advance; she shall mail instructions for such application to each such investor and post them
on her website. Following an initial 45-day application period, she shall make equitable
advances on a rolling basis to investors who meet objective financial hardship criteria,
including age and income.
The Receiver shall exclude from any distribution or equitable advance any investors
the Receiver has sued or settled with and any such investors who are current or former Baker
Donelson law firm partners or family members. Given the scarcity of resources available for
distribution and the Receivership Estate’s ongoing litigation against Baker Donelson, it is
appropriate that the Receivership Estate subordinate these investors’ claims.
5.

For the avoidance of doubt, nothing in this Order shall impair any right or

defense of any person who is a defendant in any action brought by the Receiver in connection
with, or which is otherwise related to, the Madison Timber Ponzi scheme, including without
limitation any defenses concerning the proper measure or amount of recoverable damages in
those respective actions.
SO ORDERED, this the 1st day of December, 2023.
s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

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